September 10, 2013

PayPal’s Beacon Poised To Become New Standard In Touch-Free Payment

PayPal will choose Bluetooth technology over NFC (near field communications) for their contactless payments. With PayPal Beacon, a small antenna-like device which plugs into a wall outlet, retail stores can know when their PayPal customers enter the store and charge them wirelessly and without a card, all through low-power bluetooth-enabled devices.

As a user enters a brick-and-mortar store, they’ll be able to check into the location much as they would with a social network. They’ll then only need to tell the clerk they’re paying with PayPal. Square, a competing payment service, operates in much the same way using a wireless network. When it’s released early next year, Beacon will be compatible with PayPal.

“We wanted to make something easier than swiping a credit card, and that’s doing nothing,” explained a PayPal spokesperson Anuj Nayar in a statement to the Wall Street Journal.

Beacon is meant to provide a frictionless retail experience between customer and clerk, but like many things, the technology groundwork must first be laid. PayPal says they announced Beacon several months early to give developers a chance to build out apps which utilize Beacon as well as build its functionality into their apps.

“This is an announcement for developers; there are many different approaches to how this device could be used,” said Nayar.

The most basic way Beacon should work is this: As a customer approaches a store - a local bakery and coffee shop, for instance - they’ll receive an alert on their smartphone letting them know they can pay with Beacon in said establishment. After placing their order, the customer only needs to give their name and say their paying with PayPal. A few moments later they could receive another alert from the PayPal app telling them their coffee and pastry is ready at the bar. The smartphone becomes a pocketable clerk in a sense, handling the payment and letting the customer know when their product is ready.

It was only last week that PayPal, the payment arm behind popular online auction site eBay, announced updates to their Android and iOS apps which allow users to place orders at restaurants before they arrive. Customers can also use the app to create a tab at a PayPal location and then choose how they want to pay when it’s time to leave.

Beacon is meant to take this ease of transaction experience even further and eliminate the need for the customer to pick up their smartphone, especially if they don’t care to receive any of the aforementioned notifications.

PayPal’s adoption of Bluetooth technology is also telling. Its president, David Marcus, publicly scourged NFC technology in a blog post last year, predicting that fewer and fewer companies will choose it for mobile payments before it eventually dies away.

“Is tapping a phone on a terminal any easier than swiping a credit card?” he said on the company blog. “I don’t think so…”

Last year at the Black Hat Conference in Las Vegas, one hacker exposed a critical flaw in the NFC technology as he used a hijacked NFC chip to load malware onto an Android handset. Anyone with a dirty tag in their pocket could merely walk by NFC-enabled devices and infect them without physically touching them.